Economist: why today’s energy slump will be different from the ’80s

Houston economist Bill Gilmer tried to reassure members of the Houston chapter of CoreNet Tuesday that the plunge in oil prices is not the end of the world for the local economy.

“This is not 1982,” Gilmer said, adding that Houston has seen three oil downturns since the 1980s crash and none has been as bad.

The 1980s was different because it involved a collapse of the banking and real estate industries on top of a collapse in energy prices, he said during a lunchtime presentation to the group of corporate real estate professionals.

This time around, the national economy is strong and growth on Houston’s east side will help it get through the slowdown.

Gilmer, director of the Bauer Institute for Regional Forecasting at the University of Houston, outlined a scenario where the east side of town, home to the petrochemical industry and new plant construction will grow while the west side, which relies on more upstream business activities, will slow.

Companies are making substantial cuts in their exploration and production budgets and the rig count is likely to fall by 33 percent “or perhaps more by the time this is over,” Gilmer said.

And the multiplier effect on energy jobs is not inconsequential.

“If we lose a job in the energy business there’s four other jobs that go with it,” he said.

While the east side will help lift Houston’s overall economy, much of the new employment will come from temporary construction jobs. That means the multiplier effects of those jobs will be limited.

Because those jobs aren’t permanent, “we won’t be putting up a lot of housing, apartments and high-end retail, Gilmer said.

His forecast calls for 40,000 jobs this year and another 40,000 next year.